Canadian Dollar hits eight-week low after US PMI data

The Canadian dollar is experiencing a significant drop on Monday due to a strong market dogpile towards the US dollar, with US ISM Services Purchasing Managers Index figures coming in well above expectations.

Mixed comments from US Federal Reserve policymakers risk investor outlooks and hamper risk appetite. Bank of Canada Governor Tiff Macklem is scheduled to speak in Quebec on Tuesday, leaving the Canadian Dollar absent from meaningful domestic releases. US data and statements by Fed officials dominate currency flows, with Canada absent on the economic calendar.

The US ISM Services PMI for January climbed to 53.4, accelerating above the previous month’s 50.5, which saw only minor revisions. The US ISM Services Prices Paid hit an 11-month high as businesses continue to see inflationary pressure in January. The US ISM Services New Orders Index rebounds to 55 in January from December’s 52.8, as economic activity continues to vex markets, hoping for earlier rate cuts.

Fed’s Neel Kashkari noted that higher neutral rates might mean that monetary policy may not be as tight as previously thought. Chicago Fed President Austan Goolsbee pulled up short of Fed Kashkari’s earlier statements, noting that while he needs more inflation progress in the data itself, he won’t rule out a March rate cut entirely.

Technically, the Canadian Dollar sees broad losses on Monday as it sheds weight against nearly all its major currency peers in the new trading week. The USD/CAD pair tests back over the 1.3500 handle, running into near-term technical resistance at intraday swing highs near 1.3540.